In the early 90s, while the Internet was still in its infancy, Jeff Bezos recognized its potential as a powerful tool for e-commerce and launched a little book-selling website in 1995. Since those early days, Amazon has grown into the giant of the eCommerce world with one of the world’s best supply chain operations. With each passing day, the popularity of Amazon’s 3PL network is rising high among its sellers. In Q3 2021, third-party sellers contributed to 56% of Amazon’s sales. One reason is that it offers flexibility with its fulfillment option called – FBM (Fulfillment by Merchant).
Keep reading to know how Amazon’s FBM program can help you strengthen your supply chain, reach more customers, and take your sales to the next level.
What is Amazon FBM?
Under the FBA model, Amazon manages all logistics and customer support for the seller. As customers place orders, Amazon picks up the product from a fulfillment center, packs it, and finally ships it to customers. If you are a third-party seller and don’t already have a logistics and fulfillment infrastructure in place – FBA may be a good choice for you. While some sellers go for FBA, others consider FBM as a better option. The FBM model gives a lot of benefits to sellers which the rest of this article will explore. Let’s start by understanding what FBM means.
Under FBM, third-party sellers take care of all storage, logistics, and fulfillment on their own, meaning you will be responsible for directly shipping your products to customers. You will also manage inventory, handle returns, and provide customer service.
Does this sound like a lot of work? Why would you want to take on these additional tasks?
One powerful reason is that FBM can help strengthen your supply chain. Read on to know-how.
By Avoiding the Time Constraints of Amazon’s Fulfillment Centers
Being the eCommerce giant that it is, Amazon currently has 110 active fulfillment centers in the U.S. and 185 centers globally. The company even doubled the size of its fulfillment network between December 2019 and June 2021. And yet, some of these fulfillment centers are very space- and time-constrained. This often results in delayed shipments and deliveries, which frustrates customers and can affect your company’s reputation.
But with FBM, you manage your own storage and fulfillment, so you can continue fulfilling orders, keep track of delivery progress, and take steps to avoid delays. In other words, you don’t have to depend on Amazon’s supply chain network to keep your business going.
By Controlling your Inventory
If you are an international seller selling through Amazon’s fulfillment centers, your inventory may spend many days – if not weeks – in transit. Once your product arrives in the customer’s country, it will be processed at one or more ports before being transported to a fulfillment center. This will lengthen delivery timelines, so you will end up with sellable inventory for even fewer days than you started with.
For instance, if a fulfillment center limits you to 60 days of inventory coverage (including lead time), and international shipping takes 45 days on average, you will have sellable inventory for only 15 days.
With FBM, you have more control over your entire supply chain, including your inventory and inventory coverage days. You will know exactly:
- How much inventory you have in stock
- Which products are selling well (or not)
- What changes you should make to maximize sales and profits
Moreover, since you can directly access your inventory, you can quickly deal with issues like incorrect or delayed deliveries that can annoy customers and even result in them leaving you for your competitors.
By Reducing your Costs
Amazon makes every effort to be transparent about its fee structure for third-party resellers. For instance, on its pricing microsite, it clearly states that it charges resellers referral fees and fulfillment fees. The site also mentions that resellers might incur other fees, such as:
- Inventory storage fees
- High-volume listing fees
- Refund administration fees
- Advertising fees
These costs can vary and are therefore not always easy to plan for or anticipate.
When you opt for FBM, you have insights into every aspect of your supply chain, which means you can anticipate costs better, plan for them, and even take fast(er) and more proactive action to optimize or minimize them. For instance, you can change suppliers, reduce inventory size, or switch to low-cost social media advertising. By lowering your costs, you can increase margins, and ultimately boost revenues and profits.
FBA + FBM = Stronger Supply Chain
In the above sections, you saw why FBM can be an advantageous choice for your business. But this doesn’t mean that you can only choose either FBM or FBA. The fact is – you can choose both.
In fact, by combining FBM with FBA, you can further strengthen your supply chain, and garner great results as an Amazon reseller. For example, if your inventory is running low in Amazon’s (FBA) fulfillment centers, you can still continue fulfilling orders and selling your products – as FBM!
If you have not yet considered Fulfillment by Merchant as a strategy for selling your products on Amazon, we urge you to do so sooner rather than later. By adopting FBM, you can make a huge difference to your supply chain’s performance, outcomes, and profitability. FBM is particularly useful if you sell unique items or have a low-volume business, and can manage shipping and fulfillment on your own.
But at times, you may find it overwhelming to self-manage your order fulfillment obligations. The good news is you don’t have to! For over a decade, Ergode has helped Amazon’s third-party sellers to streamline their FBM tasks and thus, their supply chains, with cutting-edge AI-powered solutions and a cost-efficient execution model. We even help create storefronts and buy boxes.
Get in touch with us to know more about our world-class reseller and brand aggregator services.